In Argentina, the peso continued to fall, now down around 70% in value. Unless the IMF provides a loan soon, many banks are expected to fail, and a loan is not on the horizon. Having already defaulted on over $135 billion in debt, Argentina is having a hard time getting anyone to listen. There is no mention of gold in Argentina news.

On the other hand, Japan appears to be on its way to inflating the yen as a way of reducing the importance of non-performing (bad) loans. That explains the imports of gold in the past two months, which indicates that many citizens think that the yen will lose value soon and are covering their assets with precious metals.

In the U.S., consumer confidence returned to the stock market as the Dow closed the month on a strong note at 10403. Retail sales were up, existing home sales were up, Productivity is approaching what some call full capacity, indicating that the recession is rapidly ending, if not already over. Short term interest rates determined by the Federal Reserve are beginning to look too low, and many analysts feel that the Fed will raise rates soon.

Housing prices all over the U.S. have been rising over the past year, providing funds for homeowners to dip into for spending or investing. The long bond rate increased from 5.42% to 5.81% pushing mortgage rates up, and indicating that the housing boom may be coming to a peak. With the 30 year mortgage rate now back over 7%, there will be very little refinancing done to support consumer spending as done over the past several years.

The price of gold reached $304 but was unable to make a real surge through that level due to many known and unknown factors. Meanwhile gold equities are finding some respect. A major economic shift has taken place over the last year, and most anti-gold analysts have not had much to say. Most of them aren't old enough to remember the late 60's and early 70's when there was a major run on the U.S. gold reserves, causing President Nixon to shut the gold window in 1971. That was caused by an over-abundance of U.S. dollars overseas in the hands of foreign banks coinciding with a weakening dollar.

For the month, the price of gold climbed only from 296.7 to 302.6 after dipping to 289.9. Silver climbed from 4.49 to 4.64, most in the last week of the month. XAU, representing large gold equities, advanced from 65.1 to 70.8. Oil closed over $26 and the euro ended at .871.

fn         Fund                   1 mo   3 mo  12 mo   2 yr   3 yr
19 UNWPX US Global World Gold .   16.3   49.7   74.5   19.5   -5.2
18 USERX US Global Gold Shrs  .   14.2   54.5   84.2   45.4   24.5
 1 ASA   ASA Ltd              .   12.6   44.9   81.7   79.6   95.5
10 MIDSX Midas Fund           .   12.5   32.6   57.5  
 8 GOLDX Gabelli Gold         .   12.1   47.4   95.5   83.8   75.0
 6 SGGDX First Eagle SGen Gold.   11.6   50.4   94.8   82.4   73.3
21 INIVX Van Eck Intl Inv GoldA   11.5   45.2   86.8   60.2   27.6
 2 BGEIX Amer Cent Global Gold.   10.9   40.2   92.5   70.5   46.4
20 USAGX USAA Gold            .   10.3   38.9   91.2   78.5   70.8
 5 FSAGX Fidelity Select Gold .   10.1   35.7   78.3   62.0   57.9
 4 EKWBX Evergreen Prec Mtls B.    9.9   37.1   75.8   68.4   59.0
16 SCGDX Scudder Gold         .    9.8   30.6   54.4   56.5   44.7
17 TGLDX Tocqueville Gold     .    9.6   45.9   91.8   78.3   89.1
 9 FGLDX INVESCO Strat Gold   .    9.6   33.9   60.1   43.1   23.8
14 LEXMX Pilgrim Prec Metals A.    9.5   34.6   68.5   56.8   45.6
11 MNTGX Monterey OCM Gold    .    9.5   42.0   81.6   61.5   47.2
 3 INPMX AXP Precious Metals A.    9.2   34.8   58.0   46.5   33.0
12 OPGSX Oppenheimer Gold A   .    8.4   29.3   52.1   42.7   39.8
 7 FKRCX Franklin Gold A      .    8.1   27.1   45.5   43.8   56.1
15 RYPMX Rydex Prec Metals    .    7.8   32.5   57.4             
22 VGPMX Vanguard Gold/Pr Mtls.    6.8   25.0   61.0   61.8   70.2
13 PRPFX Permanent Portfolio  .    1.6    4.5    9.1    4.6    5.4

Gold funds just keep climbing. This is the third month where gold equities have made substantial advances as gold advanced from 278.7 to over 302 for the quarter. The numbers over the last 12 months are a beautiful site.

fn    Fund                  pos  nav(3-28)
 1 ASA Ltd              .   100.0   28.98
 6 First Eagle SGen Gold.   100.0    9.43
20 USAA Gold            .   100.0    9.14
22 Vanguard Gold/Pr Mtls.   100.0   10.69
 4 Evergreen Prec Mtls B.   100.0   16.81
 2 Amer Cent Global Gold.   100.0    7.43
14 Pilgrim Prec Metals A.   100.0    4.28
12 Oppenheimer Gold A   .   100.0   12.76
 3 AXP Precious Metals A.   100.0    7.25
18 US Global Gold Shrs  .   100.0    4.42
19 US Global World Gold .   100.0    8.13
 5 Fidelity Select Gold .    99.3   20.10
17 Tocqueville Gold     .    99.2   20.18
 7 Franklin Gold A      .    98.5   11.99
16 Scudder Gold         .    97.6    8.97
21 Van Eck Intl Inv GoldA    97.3    7.77
13 Permanent Portfolio  .    96.6   19.23
 9 INVESCO Strat Gold   .    95.8    2.29
10 Midas Fund           .    95.7    1.26
 8 Gabelli Gold         .    95.5    9.54
15 Rydex Prec Metals    .    92.6   27.90
11 Monterey OCM Gold    .    92.5    6.83

One more time, almost all of these set new 52-week highs this month, and 11 on the last day of the month. In all cases, the low was set last April with the high last week.

fn    fund                  assets
22 Vanguard Gold/Pr Mtls.   416
 5 Fidelity Select Gold .   381
 1 ASA Ltd              .   279
 2 Amer Cent Global Gold.   261
 7 Franklin Gold A      .   207
21 Van Eck Intl Inv GoldA   157
16 Scudder Gold         .   128
12 Oppenheimer Gold A   .   113
20 USAA Gold            .   113
 9 INVESCO Strat Gold   .    86
14 Pilgrim Prec Metals A.    69
19 US Global World Gold .    68
15 Rydex Prec Metals    .    59
13 Permanent Portfolio  .    56
10 Midas Fund           .    47
 3 AXP Precious Metals A.    39
18 US Global Gold Shrs  .    34
17 Tocqueville Gold     .    32
 8 Gabelli Gold         .    19
11 Monterey OCM Gold    .    17
 6 First Eagle SGen Gold.    16
 4 Evergreen Prec Mtls B.     9

fn      fund                 beta
 6 First Eagle SGen Gold.   1.58
 8 Gabelli Gold         .   1.43
 2 Amer Cent Global Gold.   1.40
11 Monterey OCM Gold    .   1.40
17 Tocqueville Gold     .   1.34
20 USAA Gold            .   1.32
21 Van Eck Intl Inv GoldA   1.29
18 US Global Gold Shrs  .   1.24
 1 ASA Ltd              .   1.15
 5 Fidelity Select Gold .   1.15
 4 Evergreen Prec Mtls B.   1.11
19 US Global World Gold .   1.07
14 Pilgrim Prec Metals A.   1.02
 9 INVESCO Strat Gold   .   1.00
15 Rydex Prec Metals    .   0.94
22 Vanguard Gold/Pr Mtls.   0.90
 3 AXP Precious Metals A.   0.85
10 Midas Fund           .   0.83
16 Scudder Gold         .   0.80
12 Oppenheimer Gold A   .   0.77
 7 Franklin Gold A      .   0.71
13 Permanent Portfolio  .   0.14

The beta for each fund changes monthly as the fund advances and declines, but the relative position on the ladder doesn't change much, except as a reference to other funds. As you can see, there is a big difference between management policies of different funds.

*** Funds that diversify with government treasuries, bullion or natural resource stocks generally have a lower beta and are less volatile compared to a portfolio concentrating on small capitalization mining companies.

Money magazine's mutual fund edition recently mentioned only four gold funds because their size cutoff was low enough to eliminate the rest. Only Vanguard (VGPMX), Fidelity (FSAGX), American Century (BGEIX), and Franklin (FKRCX) were listed.

The Economist magazine mentioned that the housing boom worldwide had greatly assisted in the continuation of growth in many countries, but it couldn't be expected to continue much longer. In the U.S., for instance, the rising mortgage rate, now over 7%, can be expected to greatly reduce and maybe eliminate funds coming into the markets from the refinancing of mortgages. Since that has been a driving force in the recent past, feeding on itself in the real estate market, we can also expect to see a rounding off of the climbing real estate market. In addition, if the Fed should decide to raise rates, it could have a very definite cooling effect on the markets in general. They may not have much choice if the economy keeps cruising.

In other words, even with a recovering economy, market forces have seen an increase in after tax spending by the consumer, most of this provided by refinancing of mortgages over the past year. This will not be available in the coming year, and we will see the effects of this in all markets. The effect on gold prices is up in the air. Watch the long bond rate to see if it starts to rise, indicating a weakening of the dollar, and a definite damper on real estate in general due to higher mortgage rates. If the dollar suffers, gold prices will benefit. If the dollar remains strong, gold will have a hard time getting out of its current trading range.